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Did Phillips 66’s Refining Margin Slump in Q1?

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Apr. 30 2019, Updated 10:05 a.m. ET

Phillips 66’s refining margin

Phillips 66 (PSX) posted its first-quarter earnings results on April 30. The company’s refining earnings fell to -$219 million in the quarter led by a contraction in its refining margin. Let’s review the contraction in its refining margin in detail.

Phillips 66’s worldwide refining margin contracted by $2.1 per barrel YoY (year-over-year) to $7.2 per barrel in the first quarter of 2019 due to contractions in the refining margins in three of its four operating regions. Narrower Canadian and inland crude oil spreads affected PSX’s refining margin.

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The Central Corridor region saw the biggest contraction of $5.9 per barrel, or 36% YoY, to $10.2 per barrel in the first quarter of 2019. The area accounted for 23% of Phillips 66’s oil throughput in the first quarter of 2019 (the second-highest amount compared to other regions). The Gulf Coast, which accounted for 36% of throughput (the highest compared to other regions) saw a contraction in its margin. The Gulf Coast margin contracted 19% YoY to $5.4 per barrel in the first quarter.

The West Coast, which accounted for 17% of Phillips 66’s throughput, registered a 25% YoY contraction in its refining margin to $6.3 per barrel in the first quarter. However, the margin in the company’s Atlantic Basin/Europe region expanded 8% YoY to $7.8 per barrel in the quarter. The region accounted for 23% of Phillips 66’s total throughput.

Peers’ margins

Valero Energy’s (VLO) gross refining margin contracted from $8.7 per barrel in the first quarter of 2018 to $8.0 per barrel in the first quarter of 2019 due to falls in oil spreads and gasoline cracks. The Brent–Alaskan North Sweet, Brent-Maya, and Brent–Argus Sour Crude Index spreads narrowed YoY in the quarter.

Marathon Petroleum’s (MPC) gross refining and marketing margin could contract due to a narrower WTI–Western Canadian Select spread in the quarter.

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